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Florida Court Ruling is Good News for Hotels

by William C. Coleman, III, Orlando, June 2020

 

As hotel and resort properties continue to suffer major losses due to the COVID-19 pandemic, a court ruling may provide welcome relief to properties experiencing heavy property tax burdens due to assessments on their intangible business value.

 

Rushmore Method is Flawed

 

The Fifth District Court of Appeal ruled in Singh vs. Walt Disney Parks and Resorts that the so-called Rushmore appraisal method violates Florida law. The Rushmore method requires franchise and management fee expenses to be deducted from the total property income. However, it does not provide for adjustments for intangible business value prior to making expense deductions.

 

An economist speaking on Disney’s behalf said the Rushmore method ignores certain aspects of the hotel business, such as goodwill, loyal customers, and an assembled workforce. He gave examples of the Disney brand, characters, ability to use the theme parks, character breakfasts, transportation, and high-quality service as some of the values not recognized by the Rushmore method.

 

Far Reaching Implications

 

The court’s decision states that income from a restaurant or a store on a hotel’s property should not be attributable to the overall net operating income of the hotel for property tax purposes.

 

This ruling may set a precedent that will provide appeal opportunities to all Florida hotels that have significant ancillary income.

 

If you have any questions or concerns about your property taxes, please contact us.

 

Sincerely,

 

Bill Coleman

Managing Consultant - Florida

(407) 671-1477

BillColeman@mfpoer.com